Outsourcing: Part 3

Those questions range from assessing the level of giving that donors can afford and the types of gifts the nonprofit can handle to deciding which planned-giving functions to outsource and which to keep in-house.

An effective planned-giving program tends to have donors age 60 and older who can afford to make outright gifts of at least $10,000, including some who can give $500,000 or more, says Sandra Shell, senior vice president and national director of philanthropic planning for Wachovia Charitable Services in Winston-Salem, N.C.

All three types of planned-giving programs can involve complex issues, she says.

Even if a nonprofit limits its program to bequests and gift annuities, for example, it still should assess its potential planned-giving liability, based on its debt-to-asset ratio, which could affect the organization’s ability to secure financing, Shell says.

If the endowment at a nonprofit totals only $100,000, for example, but it issues gift annuities that total $500,000, the liability for future payments to beneficiaries of those annuities could total $250,000 or more.

If a nonprofit opts to outsource its planned-giving program, Shell says, it should look for a vendor with appropriate expertise.

Small-to-medium-sized nonprofits that outsource planned-giving typically look for a single vendor that can provide consulting on potential gifts, and manage the administration of the gifts and investment of the gift assets, she said.

TIAA-CREF Trust Co., subsidiary of New York City-based nonprofit TIAA-CREF, generally handles planned-giving programs for nonprofits with at least $2 million to $3 million in life-income assets, including charitable trusts, charitable life annuities and pooled income funds, says Vic Amato, institutional trust and investment consultant.

“An organization with less than that amount probably would have a manageable number of planned gifts,” he says.

Administration and tax services, for example, can include issuing checks to donors; “sub-accounting” for individual annuity contracts that are part of a larger gift-annuity pool; tracking performance of the investments; reporting to donors and nonprofits on topics such as asset holdings and transactions; producing financial statements; preparing tax returns; making actuarial calculations; and submitting insurance reports required by the state in which the donor lives.